Wireless vendors count on 5G equipment sales for rescue

Wireless 5G equipment sales could take off in the next two years, possibly saving wireless vendors. AT&T increases the use of bots in its business, and Verizon expands owned fiber.

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Kate Gerwig and David Harbeck

Telecommunications equipment vendor Ericsson may lead the 5G race for now, but the Swedish vendor is placing its hopes on 5G equipment and software to help it recover from revenue decreases due to a global downturn in wireless equipment sales.

In other telecom news, AT&T is using automated software robots within the company to complete basic tasks that used to be done by humans, and Verizon is building out its own fiber routes to strengthen its 4G services and prepare for 5G.

Ericsson banking on 5G turnaround

Some 5G equipment vendors are relying on next-generation wireless sales to bring their companies back from double-digit earnings drops over the next few years. Most of the vendors have reported weak earnings for several quarters due to the global decline in spending on wireless radio access network (RAN).

Telecommunications and wireless equipment vendor Ericsson has been hit particularly hard with a 12% decline in fourth-quarter sales, an overall 10% decline for the year, the loss of 17,000 employee and contractor jobs, and a shakeup among top executives. Ericsson is hoping that surging interest in the 5G wireless market will turn things around, even as 4G RAN spending is tapering off, however.

"The good news for Ericsson is that it's the current market leader in 5G right now," according to Chris Antlitz, senior telecom analyst at Technology Business Research, and author of the Hampton, N.H., firm's recent 5G telecom market landscape report.

While Ericsson is in bad shape financially, if 5G takes off, the vendor's challenges will be eased significantly, Antlitz said. "Ericsson is jumping both feet forward into 5G and putting significant faith in it to get it out of this mess."

According to the landscape report, TBR expects capital spending on 5G equipment to take off among operators and stabilize the market somewhat in the early 2020s. But wireless vendors face a conundrum with 5G, because the amount of operator spending on 5G radio and mobile core will be significantly lower than in previous wireless generations due to a variety of factors, including an increased amount of software needed for 5G deployments and continued 4G LTE coverage in many markets, Antlitz said.

The only option for Ericsson right now is to right size its businesses, downsize as needed and focus on the software layer, which is where the value is, he added.

Verizon strategy focuses on owned fiber expansion

Verizon is continuing a three-pronged fiber expansion plan to acquire, lease and build out fiber routes for its wireless and business services strategy. Verizon has purchased multiple fiber suppliers, but its focus will be on organic expansion, not mergers and acquisitions.

Verizon is aiming to better address current 4G wireless needs by building out its own fiber optic network and providing wireline network backup for 5G wireless fixed-broadband and 5G mobile services. Verizon will most likely accomplish this by laying fiber closer to businesses and residences so it can provide wireless broadband access to customers at 5G speeds, according to FierceTelecom.

In the past year, Verizon purchased XO Communications for its fiber assets and signed purchase agreements with Corning to deploy 12.5 million miles of fiber optic cable over the next three years.

At its fourth-quarter earnings call, Verizon chairman and CEO Lowell McAdam said the company is currently in markets laying fiber and conducting market-by-market analyses.

Software robots handling repetitive human tasks at AT&T

AT&T is currently using more than 1,000 software robots to perform mundane tasks that were previously done by humans. The bots handle repetitive tasks in areas ranging from customer service to finance. A software bot that scans calls to AT&T customer service and compiles network traffic reports has been particularly helpful, according to The Wall Street Journal. Other bots activate equipment for customers, aggregate data for service orders and create customer service reports.

In mid-2016, AT&T deployed about 200 software bots; now more than 2,000 employees across 100 different organizations are certified bot builders. AT&T said it is using the robots to free up human employees to focus on complex, knowledge-based work, but analysts point out that the trend also leads to reducing headcount.

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